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Temporary pensions tax arrangement for NHS doctors in England

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The health secretary, Matt Hancock, has approved arrangements for NHS England to compensate clinicians for any reduction in pension benefits arising from the use of ‘scheme pays’ to settle an annual allowance tax charge for 2019/20. However, this approval comes with the warning that such arrangements could amount to tax avoidance.

The secretary of state’s formal direction allows NHS England to make additional payments to restore the reduction in doctors’ NHS pension benefits in relation to annual allowance tax charges for 2019/20 only. Under ‘scheme pays’ rules, the individual’s pension benefits must be reduced where the scheme settles an annual allowance charge, or an unauthorised payment charge will arise.

Given that the general election makes any decision on the government’s consultation (which closed on 1 November) and review of the tapered pensions annual allowance unlikely before the new tax year, the chief executive of NHS England, Simon Stevens, has argued the measure is necessary to prevent large numbers of senior clinicians reducing their working hours over the winter period.

In granting this direction for 2019/20 only, the health secretary has accepted Mr Stevens’ judgement that it is ‘operationally necessary and urgent to take further action on clinicians’ pensions to protect patient care over winter’.

Mr Hancock’s letter also notes that the proposed arrangements constitute tax planning and ‘depending on the detail’ could amount to tax avoidance if not carefully implemented. See

The Scottish government has decided on a different approach, allowing NHS staff in Scotland to receive pay in lieu of employer pension contributions between 1 December 2019 and 31 March 2020.

Issue: 1467
Categories: News